Tuesday, September 23, 2008

India benefits the American worker

There is a strong public opinion regarding outsourcing (especially when combined with offshoring) that outsourcing damages a local labor market. Outsourcing is the transfer of the delivery of services which affects both jobs and individuals. It is difficult to dispute that outsourcing has a detrimental effect on individuals who face job disruption and employment insecurity; however, its supporters believe that outsourcing should bring down prices, providing greater economic benefit to all.

A number of hi tech jobs have moved to India from the US and people often wonder whether this trend benefits the US in anyway. So, how does a developing India benefit the American worker?

Outward Indian FDI

The increasing number of home-grown Indian firms (e.g. Tata Group, Infosys,Ranbaxy) and their improving ownership-specific advantages, including financial capability, are among the key drivers of outward FDI. In addition, the growing competitiveness of Indian firms involved in providing outsourced business and IT-services to foreign clients has provided a push for these firms themselves to go offshore to operate near their clients and to look for new markets. All this requires considerable investments and hiring local candidates who understand the market.

Examples

The Tata Group that operates 16 companies in the US -- from luxury hotels and beverage business to manufacturing, telecom and IT consulting -- employs over 5,000 Americans.

Ranbaxy is creating jobs and stimulating the economy in North Carolina, New Jersey and Florida

Mahendra & Mahendra is planning to launch a car in the US.

Infosys and other IT companies are employing US workers for their American operations in search of newer markets.

Some of the Indian companies with a strong US presence include Bharat Forge, Essar Group, HCL America, ITC Kitchens of India, Jet Airways, Mahindra USA, Ranbaxy, Tata Group, Thermax and Wockhardt USA. Together these companies are in industries as diverse as steel, airlines, pharmaceuticals, auto parts, healthcare, hotels, chemicals and information technology.

According to one study Indian companies have created 30,000 new jobs in the US.

India - US Nuclear deal

India plans to import eight 1000 mw nuclear-powered reactors by 2012 and the US hopes to win at least two contracts, which it feels will significantly boost its atomic industry. The envisaged sale of at least two reactors, to what it calls ‘lucrative and growing Indian market’, would create 3000-5000 direct jobs and 10,000-15,000 indirect jobs in the US nuclear industry, the US Department of State has said.

Government support

The Indian government's adoption of liberal measures and various monetary relaxations paces up India's economic progress. Indian companies are now increasingly being encouraged to open units in the US and other developed nations. The same Indian companies that were blamed for "outsourcing" are now providing large-scale employment opportunities in the USA giving rise to a ''reverse outsourcing'' trend.

Increasing US Exports

Over the last five years, U.S. exports to India have more than doubled, helping to create better-paying jobs in the United States. The United States and India agree that trade is essential to promoting global economic growth, development, freedom, and prosperity. A richer India will have a greater purchasing power to buy US goods indirectly impacting job growth in the US.

Trade will always be a two way street and the India- US trade relations is only the beginning. With the growing strategic ties between the US and India coupled with people to people contact both countries are poised to mutually benefit from this cooperation. In years to come, USA is likely to receive more investments leading to job creation in the USA. Hence, the American worker should not view India as a threat but as a partner.

Disclaimer

The author of this Blog is not a registered financial advisor. So no steps should be taken on the basis of the advice/suggestions provided in the blog as a whole. One must consult a qualified professional when making investment decisions. The author might be wrong while analyzing an economic situation.Also the views and opinions expressed on this website are only the views of the author.